A CIO Blog with a twist; majority of my peer CIOs talk about the challenges they face with vendors, internal customers, Business folks and when things get through the airwaves, the typical response is "Oh I See". Some of you may disagree with my meanderings and that's okay. It's largely experiential and sometimes a lot of questions

Updated every Monday. Views are personal

Monday, September 23, 2013

Everything is moving to the cloud if not today it definitely will in the
near future, so say almost all the learned consultants and everyone who has an
opinion on IT. Every large IT vendor has invested in creating their own cloud
offering and acquired many start-ups who loved the dotcom like phenomenal
valuations with their offerings. Private Equity, Venture funds and Angel
investors have bet big on this new found paradigm that once again threatens to
change the world (the last time was with dotcoms a long time back).

Different models have emerged with software, platform, infrastructure,
storage, what have you, being available as a service with enterprises being
pushed towards perceived agility and budget shifts from capital investments to
operating expenses; pay as you go, variable cost, scalability, numerous
benefits being touted with all kinds of engagements and service models. They
have indeed been beneficial in many cases, disruptive in some cases with
licensed software model being challenged.

Retaliatory steps from big packaged software vendors did not deter the
cloud providers which continued to get funding and mushroomed all over. Unable
to beat them at the game, all of them have now joined the bandwagon with their
own offerings in an attempt to retain the customer. Their agility has remained
a challenge competing with the nimbler start-ups. They do have the big budgets
and deep pockets to squeeze out their smaller competitors and if that does not
work, acquire them.

When I recently came across news that one of the prominent niche cloud players
was going bust, it had my undivided attention. The provider had many partners
big and small selling their solution and many major enterprises using it. The
service offering was good, the price attractive and their growth meteoric. They
had good funding available through the rounds. And then suddenly they announced
that they had run out of cash will be winding up in two weeks’ time asking customers
to find alternatives.

Not too long ago another cloud platform provider had shut shop with 30
day notice to their customers. Their largest customer had pulled the plug; that
implied more than 50% of their revenue disappeared. They were smaller and not
highly visible, and thus their demise did not create many flutters. The
business impact to many of their customers was severe as they were left
scurrying to protect their business and revenue; in a few cases survival. There
have been other insignificant ones who did not really take off, becoming an
epitaph in history books.

Can and should enterprises and business bet on offerings from cloud
providers ? Is there a way to safeguard the adverse impact if the company went
kaput or even got acquired ? Should companies put their operations or for that
matter IT and information assets at risk with cloud lords ? Legal contracts and
SLAs rarely offer a solution despite the lawyers debating every clause and
punctuation. The impact whenever it happens even with an outage or a security
compromise is real and threatens reputation beyond the revenue or
profitability.

I do not believe that anyone can ignore the clouds and continue to work
with the conventional models of yesterday while preparing for tomorrow. Reality
is that clouds will continue to be disruptive, their value propositions worth
evaluating and experimenting with; the pragmatism required is to ensure that
the advantage it creates to either business or IT is taken into consideration
along with the risks and potential impact should there be a need to migrate
across public clouds or transition back to private cloud.

It is evident that there is no ubiquitous solution that can be applied
to all cases. The CIO with end accountability along with business stakeholders
should highlight the benefits along with the risks of the step towards clouds.
The mitigation plan should be tested like all Business Continuity Plans (BCP)
and Disaster Recovery (DR) are executed periodically. This is a necessary
inclusion now for every cloud service that an enterprise subscribes to. Costs
related to such a plan should be factored into the initial budgets when
calculating the benefit of the cloud solution.

Go for it, you have nothing to lose and everything to lose depending on
how you approach it; if you don’t, the business will always find a way to get
it leaving you to manage the mess when things go wrong.

Monday, September 16, 2013

Within a span of a week, twice I was asked the same question in
different forums by different people. I don’t know if that was pure coincidence
or what is due to the fact that both belonged to different parts of the world
and thus had different perspectives. In both cases they were curious to get an
alternative view of how CIOs succeed in culturally diverse environments with
dissimilar work ethics and realities. What if anything separates the modus
operandi and style of the CIOs in the East and the West ?

I am not sure if this is a fair comparison or should we be listing the
divergence in the approaches; both adapt well to their realities and both have
had share of success and challenges. Neither can be said to be better than the
other as they address similar opportunities a bit differently. One way of
working cannot be transplanted as-is into the other world and expect success;
even if the second is a part of the same organization in another geography. Thus
global best practices remain good to read, not always workable on the ground.

What separates the CIOs between the West (read US, Canada, and EU) and
East (mostly Asia, though the comparison set is largely India). You will hear
this from almost every vendor doing business in East, and so will you get a
similar message from the CIOs of Indian enterprises or CIOs of the Indian
entities of global companies with business interests in India. Despite the
recognition I have not come across a formal analysis of such differences in the
way of working across markets and geographies.

Everyone agrees that India is a value conscious market; products and
services vend at lower margins and discounting is normal. The outsourcing boom
in India driven by wage arbitration did not leave too much behind for the
Indian companies who had to pay higher wages to get quality skills. Due to this
the services play for the Indian market was taken up by mid-sized companies who
out-priced their bigger brothers who were happy to take the higher margin
business from the West until recession dried up their pipeline.

Software vendors realized that to gain market entry and sustain
business, the discount levels had to be different from their home markets. For
hardware manufacturers the margins stood squeezed to low single digits, enough
to cover marketing and administrative costs, not to make too much money. System
integrators and consultants fared a bit better though not by too much; only the
subject matter experts and high technology professionals could bill at global
rates, in many cases reduced to advisory roles.

CIOs in the West are process driven, like standardization, drive scale
though tools and technologies and create predictable outcomes with great
contracts and Service Level Agreements between the parties. This is fairly well
accepted as a way of doing business and everyone internally and externally
aligns to the order and discipline. There is limited flexibility and exceptions
are indeed rare. Thus everyone knows where they stand and what the terms of
engagement and governance are likely to be.

The East shuns order that takes away individuality; everyone believes
they are uniquely different. Standard solutions are frowned upon as they take
away the flexibility that casts everyone into the same mold. While contracts
are drawn up and SLA signed, they are rarely followed if at all irrespective of
the size of deal or financial implications. If there is a change in reality,
the first thing customer wants is a change in terms of engagement. If there is
an adverse event, SLA is damned, immediate service is expected.

People do business with people and that is reality. Standards can change
because the relationship manager changed jobs; who you know overrules contracts
or SLA. A call to the right person will get you right resources or help resolve
a problem. Relationships score over process every time. Value is paramount and
cost is always expected to go south. It is a delicate balance which everyone
learns to sustain their business interests. So SLA is measured, penalties
rarely enforced; contracts are fought over until signing, rarely referred to
afterwards.

I believe that for a global business to sustain, these differences are
acknowledged and adapted to. There is no other recourse. For the leader, the
CIO, s/he continues to wonder about the debate over the different realities. I
am sure there are nuances to each country, market and culture; a global entity
takes all in their stride. Employees who work across borders get used to this.
For management consultants and their elk, they want to create untenable uniform
models as global best practice. All the best to them !

Monday, September 09, 2013

In recent times we have been talking about business projects and not IT
projects that are evaluated on business criteria and require business owners to
sign-off the impact it has. The funding for such projects is done by respective
business owners and part of their P&L and budget. This has also led to
higher ownership and thereby improved success. The enablement and partnering by
stakeholders has changed the way IT has traditionally acted in the role of
creator of solutions now focusing more on business outcomes.

Many CIOs that I talk to now are creating significant impact with
business partnership extending to the customers of their internal customers.
The outward focus has created many new opportunities for making a difference to
the company. The resulting rise in credibility puts the business savvy CIO in a
position of advantage which they are willingly capitalizing. On the flip size
it is creating pressure for the IT teams to manage expectations and the
pipeline of new projects; an interesting problem to solve.

Not too long ago I was at a conference where the speaker raised the
question on how does IT impact the business – process, efficiency and
effectiveness. He spoke about looking beyond the obvious KPIs and metrics used
by business and IT teams, challenging CIOs to go higher to view the impact
technology is creating. A supply chain or customer engagement initiative has
larger impact than the immediate efficiency or new capability it creates. The
new capability can be a game changer for enterprises competing in a low margin
hyper-competitive world.

A company implemented a supply chain project to bring visibility and
transparency downstream and upstream. Connecting vendors and suppliers linked
to a demand forecast or sell-through resulted in improving the order
fulfillment resulting in increased revenue as well as bringing down the holding
cost of raw material and inventory. This led to improved customer satisfaction
which in turn got them incremental business. Thus the impact was not just
visibility; it also created new opportunities with existing customers.

The initial project when it was drawn up had modest expectations of
visibility impacting supply and consistency of execution. The result it
delivered was however beyond the defined outcomes. The limits were based on
known direct impact not factoring in the derived benefits which it actually
delivered. It took some time for the stakeholders to connect back these to the
small project taken up by IT for the supply chain team. The acknowledgement of
the nonlinear impact took a while and raised the team morale.

This case study had every CIO thinking about the nonlinear impact their
initiatives had created which they had failed to capture in the post
implementation reviews, management debriefs or meetings. Almost everyone had a
set of projects that had delivered the ripple effect of positivity which they
shared with each other. The speaker urged them to change their thinking beyond the
immediately visible to a holistic view of how every project can potentially provide
a higher ground for discussion. He also cautioned that It may not be obvious to
begin with.

We are all conditioned to believe that large high value multi-functional
long duration projects are the ones that create new capability for our
companies. I am not discounting this belief; smaller projects too can have a
cascading effect that creates a competitive differentiator at least in the
short-term. They are rarely captured as baseline benchmarks in the initial
stages. The post implementation review (PIR) rigor which is quite weak
culturally (except when things go wrong) needs to change to bring forth the
benefits.

CIOs move their teams from project to project with a sense of urgency to
fulfill the pipeline of new initiatives and keep the business happy. It is
imperative for the CIO to enforce PIR for all projects not limited to the
traditional post go-live capture of learning, but also review the same again in
three months, six months and a year after the solution has been
institutionalized. PIR is not about what went wrong and what worked or for that
matter whether the stated business benefit was delivered. It can be about the
nonlinear impact.

Monday, September 02, 2013

Recently I met a friend whose company had signed a strategic outsourcing
deal a few years back with much fanfare and was talked about as one of the
first in his industry. His company made news in restricted industry circles and
the vendor gained good leverage out of the deal. The long-term deal was
expected to create efficiency which were acknowledged by the Management and
the Board. The teams were excited with the prospects of the new engagement and
the benefits outlined.

From initial discussion to closure of the deal, it had taken a lot of
groundwork between both the teams who toiled for over a year. Setting the
baseline was the most rigorous task which required everyone to agree to the
“as-is” scenario; number of assets, age and residual life, upgrade and
replacement norms, scale-up of the business operations, revenue growth targets,
additions to workforce, industry outlook; everything was required to be put in
writing to ensure that the contract survives the signatories.

I asked him on how it was going; after going down the journey for close
to three years, had they started seeing the benefit of their decision ? How was
the service delivery and how had the users taken the change ? What would be his
advice to others who may want to go down the same path ? After all not many had signed long-term deals
in recent times. He looked at me hard as if trying to understand why I was
asking him all that. Seeing no ulterior motive in my query, he responded:

We have decided to
terminate the deal; it is not working out. Our problems started during service
transition. The team misinterpreted almost every clause and intent; we had to
involve the pre-sales team and escalate across layers to get to the shared
understanding that went into the contracting. The people on the ground had
skills deficit and were unable to come up to the same level of service pre
outsourcing. In every review meeting they promised improvements and then
nothing changed.

The commercials were
based on certain assumptions of growth and efficiency. They were expected to
make upfront investments on tools and technologies which took longer than
committed to materialize. Business had also started slowing down and the cost
was beginning to hurt. The vendor was unwilling to accept this and review terms
of engagement even though one of the primary benchmarks, cost as percentage of
revenue, was broken and going north instead of the promised south.

After much discussion,
escalation and negotiation, small tweaks were done to the model which survived
a stormy year. When business growth eluded us as per original plan and required
deferral of certain initiatives and hardware refresh, the dialogue was not very
encouraging. All the spreadsheets that made lot of sense prior to commencement
now appeared to be work of fiction. The contract did not allow significant
change downward while it captured the upside. Short of suing each other the
only recourse was termination.

In recent times there have been many outsourcing contracts that have run
into rough weather; what seemed like a great idea in the late 90s and turn of
the century have lost charm. Back then everyone was racing to outsource; now it
seems that everyone is in a race to find a way out. Most contracts that are
coming up for renewal are finding favor with neither incumbent vendor nor new
partners. Have the outsourcing benefits suddenly disappeared ? What has changed
that suddenly makes enterprises shy away ?

It is evident that for many who outsourced with large long-term deals
with big service providers have not gained the promised benefits. Where did it
fall short ? Sales organizations did a great job of painting a rosy picture while
the delivery and execution team ran out of color red. The gap between intent
and execution and the inability to adapt to variability of business has
resulted in both sides feeling shortchanged.
The advent of newer services and scenarios like RIMS and BYOD has anyway
changed the game.

One of the models that I have found survive over others is a deal where
service parameters and expectations are reset every year. It requires IT,
business and the vendor to work on the same side of the table. I have observed many
successful deals that survived multiple challenges; they had clearly defined
ownership. When you outsource, you still are accountable and responsible; it is
not abdication of responsibility. New models of outcome based engagements are
appearing on the horizon, their efficacy is yet to be experienced.